SUPPORTS ITEM NO. 4 P&E COMMITTEE AGENDA SEPTEMBER 14, 1995 ADMINISTRATIVE REPORT Date: August 31, 1995 TO: Standing Committee on Planning and Environment FROM: The Director of Civic Theatres in consultation with the Director of Cultural Affairs, the Manager of Real Estate Services, the Manager of Facilities Development and the Deputy Director of Finance. SUBJECT: Vancouver Opera Association - proposal to develop portion of Queen Elizabeth Theatre Plaza and Parkade as Opera Production Centre. RECOMMENDATION A. THAT Council withhold from development an area on and under the Queen Elizabeth Theatre Plaza for a period of two years to allow the Vancouver Opera Association to further develop their plans for an Opera Production Centre. B. THAT Council approve in principle a non-registered lease of a volumetric parcel containing the proposed Opera Production Centre under the following major terms; 1. Rent: $1.00 per year with no charge for property taxes or amounts in lieu of taxes. (As this arrangement is considered a grant, EIGHT AFFIRMATIVE VOTES are required.) 2. Term: 60 years. 3. The City has the right to terminate the lease for redevelopment of the site upon one year's notice, such right of termination not to be exercised for the first 30 years of the 60 year term. 4. Further terms and conditions to the satisfaction of the Director of Legal Services, the Manager of Real Estate and the Director of Civic Theatres. C. THAT residual density on the site be retained by the City. D. THAT Council direct staff to report back outlining the terms of the lease as soon as the conditions outlined in this report have been met to the satisfaction of the City Manager. - 2 - CITY MANAGER'S COMMENTS The City Manager RECOMMENDS approval of A, B, C, and D. COUNCIL POLICY In April, 1990 and again in December, 1991 Council approved the Cultural Facilities and Projects Priorities Report which included reference to civic support of rehearsal/production/administration spaces, including specific reference to the Vancouver Opera Association, subject to the presentation of feasible proposals for their realization. - 2 - On November 17, 1993 Council approved Vancouver Arts Initiative (VAI) recommendations including direction to staff to review and report back on "how the City might assist arts organizations in acquiring production, performance and/or administrative space through a variety of mechanisms including no-risk loans, bonusing, long-term lease of City- owned properties at nominal rents, and/or funding through the Capital Grants program." With respect to "purpose-built" facilities on City property, Council's practice has been to provide the site with no charge for rent or amounts in lieu of taxes. These arrangements are considered as grants. SUMMARY This report provides staff evaluation of a proposal by the Vancouver Opera Association to lease a portion of the Queen Elizabeth Theatre Plaza, including the present QET Restaurant location and a significant area below the Plaza, and to construct on that site a building that would house the VOA's operations, an expanded restaurant and rental space for other arts organizations. The VOA are requesting; (a) a 99 year lease at $1.00 per year; (b) transfer of residual density rights on the site to VOA; (c) exemption from property taxes; (d) assistance in some form (a share of parking revenues)with the cost of replacing parking spaces in the QET parkade that would be lost due to this development.Staff are recommending approval in principle of a 60 year lease at $1.00 per year and property tax exemption but do not support transfer of density rights nor sharing the cost of replacing lost parking stalls. Staff are recommending additional conditions that include the City's right to terminate the lease after 30 years for redevelopment of the site and a requirement for the VOA to demonstrate its ability to independently fund both capital and operating costs. The VOA are including provision for community access to the large rehearsal hall-cum-performance space and rental offices. Terms for these uses will also need to be developed to the satisfaction of the City. BACKGROUND Civic Theatres Department conducted a feasibility study for capital improvements of the three theatres at the end of which, in September 1994, a workshop was presented to Council. The results of the study indicated possibilities for adding to the QET/Playhouse complex to provide administrative and production space for resident performing arts companies. Potential spaces included an addition along the Cambie Street facade extending the full length of the complex, three or more stories high; the potential to double the footprint of the existing QET Restaurant structure and add two floors of rental space on top; and construction of a new large rehearsal hall below grade on the Dunsmuir Street side of the complex. These proposed upgrades were included in a preliminary development permit application approved with conditions on March 13, 1995. During the same time period, the Vancouver Opera Association commissioned a study of its needs for a permanent home. A design was prepared for a stand-alone building located on the former Greyhound Bus - 3 - Depot site on Cambie Street and presented to City staff for consideration. Staff recommended that it would be inappropriate to encumber that site prior to a major development proposal for the entire site. As the time frame for such a development is beyond the objectives of the VOA, staff suggested they reconsider the QET Plaza location. DISCUSSION Over the past several years the Vancouver Opera Association has enjoyed considerable success resulting in an increase in the number of productions each season to five operas and an increase in the number of performances of each opera. One consequence of this success has been the retirement of their operating deficit at the end of the 1994-95 season. During the same period the VOA has also had to lease and move into new administrative and production facilities. The term of that lease has another three years to run at which time they will potentially have to move again. Aside from the unproductive expense of moving, suitable space for a performing arts company is extremely difficult to find. "Suitable space" means that all of the Opera operations should be in the same building and that building should be part of, or in very close proximity to, the theatre in which they perform. The Proposed Design The VOA have retained an architect to develop conceptual designs to accommodate these needs, incorporating them with other needs of the site and complementary community uses as the basis for their proposal. Some work has been done with Civic Theatres, Social Planning and Planning staff to accommodate various requirements of the site. In addition to the spaces required specifically for opera production, the VOA proposal provides for additional office space for rental at affordable rates to other local performing arts organizations for a period of ten years. It is foreseeable that the VOA might eventually need these spaces for expansion. If Civic Theatres is able to expand the complex on the Cambie Street side during that time, then the companies accommodated in the VOA building would be able to relocate within the complex. A particularly interesting part of the proposal is the large rehearsal hall. At the dimensions needed for opera production, such a room can also be used as a studio or "Black Box Theatre" of up to 250 seats. The VOA proposal includes making time available for community uses at reasonable rates, outside of the time dedicated to Opera use. The proposed development would take up about one-half of the existing 250 parking spaces in the QET Parkade. The proposal provides for excavating and constructing a new, third level of underground parking so there would be no loss of parking capacity. The proposal also includes a restaurant space, double the footprint of the present one. This is consistent with Civic Theatres' programme. At the larger size, the restaurant becomes viable as a full-service commercial operation, depending on market conditions at the time. The total development proposed including the expanded restaurant but excluding parking, is 77,710 square feet. Including all parking (old and new) it would be a total of 123,670 square feet. The Director of Civic Theatres views the proposed development as complementary to the purposes of Civic Theatres and a "best use" of the site in that it provides an on-site home for a major resident user of - 4 - the QET with long-term security, similar to the Vancouver Symphony Orchestra's residency in the Orpheum; it accommodates other community arts uses; it supports the development of a cultural precinct or entertainment district; and in total it supports the long range vision for the QET/Playhouse complex to become a true performing arts centre. The Planning Department have reviewed the design at various stages and, while all of the usual approvals must still be secured, the overall view is that it is possible to proceed with the proposal. Project Funding The project will require a significant fund raising effort on the part of the VOA. In support of that fund raising effort, the Board of Directors of the VOA are making several requests of Council, but are not requesting a capital grant from the City. The requests contained in their letter, Appendix "A", have been somewhat modified after discussions with City staff. In summary, the requests are: 1. A volumetric parcel lease to the Vancouver Opera Association for 99 years at $1.00 per year. 2. Transfer of residual density rights for the portion of the site leased to the VOA. 3. Exemption from property taxes for the life of the lease. 4. A share of revenue from the parking operation in compensation for the capital costs associated with replacing the parking stalls that would otherwise be eliminated by this development. Staff Position 1. Staff support a non-registered volumetric parcel lease for 60 years with option to renew at $1.00 per year, for an area that includes all of the proposed VOA development except the restaurant and parking. Staff are recommending that, in the event the City may wish to redevelop the site at some time in the future, a lease be subject to termination upon one year's notice, such termination not to be exercised during the first 30 years of the 60 year term. 2. The VOA will be required to construct the restaurant space including restaurant infrastructure (services, support facilities etc.) but not including leasehold improvements, to the satisfaction of the Manager of Facilities Development. 3. The VOA will be required to construct, at a minimum, one-for-one replacement of all parking stalls removed for this project to the satisfaction of the Manager of Facilities Development. The Development Permit Board will determine whether additional parking will be required because of this development. Staff believe that the VOA must comply with the parking requirements at no cost to the City and that no revenues should be diverted to the benefit of the VOA. The net revenues from the present parking operation, (up to $300,000 annually), accrue to Civic Theatres Capital Reserve. Reducing this income simply puts pressure on Civic Theatres to replace that income with other and potentially more controversial kinds of income to support upgrades to the - 5 - theatres. 4. Staff do not support the transfer of density rights to the VOA. This kind of transfer of density is not consistent with the established principles in support of heritage preservation. Staff believe that the available density on the QET site should be retained for eventual use in support of Civic Theatres capital improvements. 5. Staff support the requested exemption from property tax for the life of the lease. Conditions Staff recommend that, prior to entering into a long term lease, a set of conditions concerning project funding and facility operations be met to the satisfaction of the City Manager as follows: 1. The VOA must demonstrate that the funding has been secured sufficient for the entire capital cost of the project including finishing and furnishing of the large rehearsal hall to public performance standards. 2. The VOA must demonstrate their on-going ability to fund the operation of the facility without additional civic support or operating debt. 3. Agreement must be reached on terms that will form part of the lease providing for community access for non-profit arts organizations to the rehearsal hall/performance spaces and rental offices at rates based on recovery of operating costs. FINANCIAL IMPLICATIONS The VOA are not requesting a capital grant from the City at this time. During construction the QET garage and restaurant would be closed. The foregone revenue to Civic Theatres could be as much as $300,000 annually, impacting the Capital Reserve which provides funding for Civic Theatres upgrades. It is possible that construction could be staged in such a way as to re-open the garage before completion of the whole project and reduce the loss. This matter of foregone revenue will be addressed more accurately when staff report back on lease terms. SOCIAL IMPLICATIONS The development could be seen to represent a lost opportunity for the City to develop the property and retain all revenues that might result. Civic Theatres and Cultural Affairs staff view this proposed development as a "best use" of the site in view of the significant social and cultural benefits which include; providing long term security for the Vancouver Opera Association; providing additional accommodation and performance facilities for the performing arts community; and supporting a valuable addition to the developing downtown cultural and entertainment district. CONCLUSION Assuming the conditions outlined in this report can be satisfied by the Vancouver Opera Association, staff view the proposed development of an Opera Production Centre on and under the Queen Elizabeth Theatre Plaza as being mutually supportive of the VOA, Civic Theatres, the development of the downtown cultural/entertainment district and the City's cultural - 6 - facilities priorities. A copy of this report has been sent to the Vancouver Opera Association. * * * * *